Diageo completes United Spirits takeover and takes control

The world’s largest distiller Diageo Plc. on Thursday completed its takeover of Vijay Mallya-promoted United Spirits Ltd (USL), nearly eight months after the companies announced the transaction that will provide much-needed funds to the liquor baron and his debt-laden UB Group.
The London-based distiller bought a 14.98% stake from a company owned by Vijay Mallya for $521 million, Diageo said in a statement. That gives it a holding of 25.02%, which combined with voting and other governance arrangements with Mallya is enough for control.
United Spirits will give the UK company the leading position in the world’s largest whiskey market, where demand for alcohol is booming as consumers earn and spend more. “We will now begin the work to identify and capture the significant growth opportunities within this attractive market,” Diageo Chief Executive Officer Ivan Menezes said in a statement.
Diageo had agreed to buy a 53.4% stake in United Spirits for some Rs.11,166.5 crore in a complex deal announced on 9 November. The transaction included the purchase of a 19.3% stake from United Breweries Holdings Limited, the holding company of the UB Group, and fresh preference shares from United Spirits. The British distiller was to buy the remaining 26% from the public shareholders of United Spirits.
The largest-ever deal in Indian liquor was expected to be completed by 31 March, but it was held up by the Competition Commission of India (CCI) and the Securities and Exchange Board of India (Sebi) as the regulators sought more details on the deal structure and anti-trade issues.
It was further delayed as lenders to Mallya’s Kingfisher Airlines Ltd filed a petition to wind up UBHL and tried to stop the UB Group’s holding company from selling shares to Diageo. UBHL has given corporate guarantees worth Rs.8,925.86 crore to Kingfisher Airlines’ creditors, according to the company’s latest annual report.
Diageo’s open offer to shareholders also failed with the company announcing in May that it bought less than 0.5% of United Spirits shares, which are trading at a significantly higher price than what the UK distiller had offered.
Since the deal was announced in November, Mallya’s fortunes, already dented by his investment in Kingfisher Airlines, have taken a bigger knock. Kingfisher’s lenders are in the process of collecting around Rs.1,000 crore by selling the pledged shares of UB Group companies including United Spirits and Mangalore Chemicals and Fertilizers Ltd (MCFL).
Mallya may lose control of MCFL with Deepak Fertilisers and Petrochemicals Corp. Ltd and Kolkata-based Adventz Group having bought large stakes in the fertilizer maker.